Can Hnry handle your taxes if you’re a sole trader subcontractor earning under the Construction Industry Scheme (CIS)? Short answer: Yes!
Deductions under the CIS count towards your income tax and National Insurance. When you sign up for Hnry, we take this into account, calculating and deducting only what you owe on top of these advance payments.
Basically, we make it so you never have to think about tax again. Here’s how it all works:
What is the Construction Industry Scheme?
Under the Construction Industry Scheme (CIS), contractors deduct money from subcontractors’ payments and pass it to HMRC. These deductions count as advance payments towards the subcontractor’s tax and National Insurance bill.
Importantly, “contractors” and “subcontractors” here could refer to companies, partnerships, and self-employed individuals – any of these businesses could count as a contractor or subcontractor under the CIS.
HMRC requires all eligible contractors to register for the scheme. Subcontractors aren’t required to register, but deductions from their payments will need to be taken at a higher rate if they aren’t registered (20% vs 30%).
💡 Not sure if the CIS applies to you? Head to the gov.uk website for more information.
How do tax payments work under the Construction Industry Scheme?
As a CIS subcontractor, your contractor may need to make CIS deductions from your payments and pass them to HMRC. If you’re registered for CIS, this percentage is set at 20%. If you’re not registered for CIS, the percentage is 30%.
Because income tax is a progressive tax system, where income is taxed differently depending on what tax bracket it falls within, it’s unlikely that you’ll owe a flat 20% rate of tax across all your income.
📖 For more on how income is taxed, check out our guide to tax rates for sole traders.
If your CIS deductions don’t fully cover your tax and National Insurance bill, you may still have tax to pay after the end of the tax year. That’s less than ideal!
How Hnry works with the Construction Industry Scheme
Hnry automatically calculates, deducts, and pays your income tax, National Insurance contributions, and other obligations (like student loan repayments) for you, every time you get paid.
We base our calculations on how much you earn, as well as any allowable expenses you’ve raised in the Hnry App, and adjust your deductions accordingly.
For CIS subcontractors, we can factor in any tax prepayments already deducted from your payments. All you need to do is let us know what percentage of your income a client is withholding for tax purposes, and we’ll take care of the rest. Easy!
Sam is a subcontractor working in construction. The contractor he works for deducts 20% from each payment, as Sam is registered for CIS.
Sam is set to earn £80,000 this tax year. His effective tax rate (the actual percentage of income owed in tax to HMRC) is higher than 20%, even excluding National Insurance contributions. He’s also paying off a Plan 2 student loan.
Instead of calculating and setting aside funds himself, Sam signs up for Hnry and lets us know that he works under CIS.
Hnry includes the 20% already deducted from Sam’s pay in our tax calculations. We deduct the additional percentage owed in income tax, as well as Sam’s National Insurance contributions and student loan repayments, and forward these on to HMRC on Sam’s behalf.
At the end of the tax year, Sam’s income tax, National Insurance contributions, and student loan repayments have been paid in full ahead of time. He uses the time saved on tax admin to head to the pub for a celebratory pint.
Hnry sorts taxes for sole traders
Hnry is an award winning app and tax service, designed specifically for sole traders. For just 1% +VAT of your self-employed income, capped at £600 +VAT a year, Hnry will calculate and pay all your tax bits and bobs for you, including:
- Income tax
- VAT (if applicable)
- National Insurance contributions
- Student loan repayments
- Private Pension contributions (optional)
If you’re required to register for Making Tax Digital, we’ll complete and file your quarterly updates. If you’re not, we complete and file your Self Assessment – it’s all part of the service!
Better still, using the Hnry platform costs less than using a traditional accountant, and is entirely tax deductible.
If that sounds good to you, join Hnry today and never think about tax again!